Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : MSFT Internet Explorer vs. NSCP Navigator -- Ignore unavailable to you. Want to Upgrade?

To: Justin Banks who wrote (14040)	11/11/1997 12:34:00 PM
From: Reginald Middleton	Respond to of 24154

<If a company's stock is low but they've got mondo dollars in the bank, why wouldn't they instigate a stock buyback (typically)?> Unless a stock buy back action is aimed at fuding a compensation plan, it should be considered a stern warning about MGMT's outlook for future growth. The stock buy back tells the astute investor that mgmt. cannot find an internal/external investment that is forecasted to yield anything higher than its own cost of capital. This is a BIG negative. Per share growth does not increase the value of the entity itself, and is therefore quite misleading. That is one of the major tenets favoring DCF over earnings capitalization. It primarily means that they believe they cannot grow the enterprise (investment in the enterprise consists of much more than aqcuisitions - ex. R&D, upfront marketing, etc.) at a rate that exceeds the markets expectations. That is usually why the stock's price was depressed to begin with. A much more efficient use of said funds would be investment to actually improve the value of the entity itself and not the entity's per share earnings. Just imagine the share price of MSFT if it had spent the bulk of thier FCF dollars on buying back its shares instead of developing Windows 95 (which had a spectular return on investment BTW).